Weekly insights + SMS alerts
AppLovin Corporation (APP) stock fell nearly 2% in Thursday's premarket trading as analysts lowered their price forecasts and mounting legal challenges raised fresh concerns about the advertising technology company.
The stock faces pressure from a securities class-action lawsuit questioning AppLovin's AI growth claims and a separate lawsuit alleging improper advertising practices involving children.
Goldman Sachs analyst Eric Sheridan maintained a Neutral rating on AppLovin and lowered his price forecast to $400 from $465 on Wednesday.
Similarly, Wedbush analyst Alicia Reese cut her price forecast to $560 from $610 while maintaining an Outperform rating.
The latest reductions followed a similar move by Morgan Stanley on Oct. 13. The firm lowered its price forecast to $400 from $450 while maintaining an Overweight rating.
Despite the cuts, Wedbush and Morgan Stanley maintained bullish ratings on AppLovin, while Goldman Sachs remained Neutral.
AppLovin faces a securities class-action lawsuit alleging the company misled investors about the strength and development of its artificial intelligence-powered advertising products.
On Wednesday, law firm Bleichmar Fonti & Auld LLP (BFA) reminded investors that they have until Nov. 16, 2026, to seek appointment as lead plaintiff in the lawsuit.
The lawsuit alleges that AppLovin and certain senior executives overstated the capabilities and growth prospects of the company's AI-powered advertising platform.
According to the complaint, AppLovin promoted continuous improvements in its AI models as a key growth driver. However, delays in developing its generative AI video creation tool allegedly slowed those improvements and affected advertising performance.
The case, Talbot v. AppLovin Corp., et al., is pending in the U.S. District Court for the Northern District of California.
AppLovin shares faced significant selling pressure after two developments raised concerns about its advertising business.
On July 13, Bank of America Securities reported slower growth in AppLovin's e-commerce advertising business. The analyst also noted limited improvement after the company expanded access to its advertising platform on June 22.
Bank of America subsequently lowered its annual revenue estimate. AppLovin shares fell 12.6% to $442.85 on July 13.
The pressure intensified after AppLovin reported quarterly revenue of $1.92 billion on Aug. 5, missing Wall Street's $1.94 billion estimate.
The company attributed part of the shortfall to delays in launching its generative AI video tool. Those delays affected advertising revenue and AI model performance.
Consequently, AppLovin shares plunged 19.6% to $335.67 on Aug. 6.
Meanwhile, San Diego County filed a separate lawsuit against AppLovin, alleging the company bypassed parental controls to display sexually explicit content and advertisements for alcohol, vaping products and adult dating services in games played by children, according to Bloomberg.
The lawsuit also alleges that AppLovin collected sensitive data from children's devices despite parental controls and ad-tracking restrictions. The company allegedly used a tracking technique known as fingerprinting to target children without parental consent.
AppLovin's policies prohibit collecting children's data or targeting minors with advertisements.
APP Price Action: AppLovin shares were down 1.67% at $257.80 during premarket trading on Thursday. The stock is trading at a new 52-week low, according to market data.
Real-time alerts on price moves, news, and trading opportunities.
Join 20,000+ investors. No spam, ever.
